Industrial technology conglomerate Smiths Group has unveiled plans for a significant restructuring, announcing its intention to sell or separate two of its four main divisions as it seeks to streamline operations and boost shareholder returns.
Investors cheered the news, and shares jumped over 15% in early trading to touch all-time record highs.
Smiths Group reported organic revenue growth of 15.8% for the three months to 1 November 2024 but had been under pressure to explore options to boost shareholder value.
The FTSE 100 company will focus on its John Crane and Flex-Tek businesses, which specialise in industrial technologies for flow and heat management. These divisions have demonstrated strong performance, each achieving operating profit margins above 20% and returns on capital employed exceeding 25% in fiscal year 2024.
Under the restructuring plan, Smiths will launch a sale process for its Interconnect division, targeting completion by the end of 2025. Following this, the company plans to separate its Detection business either through a UK demerger or sale.
Explaining the rationale behind the strategy, Roland Carter, CEO of Smiths Group, said: “We start from a position of strength and as we execute this strategy, we will become a more focused business with significant potential for future growth and value creation. Focusing on our world-class John Crane and Flex-Tek businesses and carefully managing the separation of Smiths Interconnect and Smiths Detection, we will deliver significant value for all stakeholders.
The strategic shift comes after a period of robust financial performance, with the group delivering 7% compound annual organic revenue growth between FY2021 and FY2024. The company believes the separation of Interconnect and Detection will better serve these businesses’ prospects while creating additional value for shareholders.
The group has also announced a significant increase in its share buyback programme from £150 million to £500 million, with the additional £350 million to be returned to shareholders by the end of 2025. This will have played a part in today’s jump in shares.